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Old 11.11.2021, 16:22
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UK Taxation on Pension Lump Sum

Does any British expat living in Switzerland have experience in reclaiming UK tax on their UK personal pension pot which was cashed in as a lump and taxed by HMRC at withdrawal time, per the rules on the 75% part (first 25% being tax free) and after personal allowances etc? I was advised by an international financial advisor that this can be reclaimed at a later time and it apparently requires the Swiss tax office liaising with HMRC that the claimant will be paying tax on it, as part of their wealth tax while resident in Switzerland. Thus HMRC would only later refund the tax under the Double Taxation Agreement. However HMRC do not confirm this themselves. My advisor has not released any further details as it involved another customer and only said HMRC would clarify, albeit negatively in my case? Am I maybe missing something here? My pension holder/provider does not offer a better alternative like drawdown to residents abroad.
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Old 11.11.2021, 18:29
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Re: UK Taxation on Pension Lump Sum

Article 18.2 of the UK - CH Dual Tax Agreement would imply that the lump sum is taxable in the UK:

"..a lump sum payment derived from a pension scheme established in a Contracting State and beneficially owned by a resident of the other Contracting State shall be taxable only in the first-mentioned State. "

The DTA has been discussed a few times on the forum but in the context of people leaving CH to return to UK. They confirmed they were able to withdraw their pension earned in CH once in the UK and that HMRC confirmed that they did not have to pay tax on it in the UK.

Perhaps clarify with the Financial Advisor what he or she was referring to(?)

(*)
https://assets.publishing.service.go...s_in_force.pdf
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Old 12.11.2021, 11:30
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Re: UK Taxation on Pension Lump Sum

Not sure what you want to achieve ... take advantage of the 25% tax free UK allowance, or of the lower Swiss income tax you would pay on the rest?
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Old 18.11.2021, 18:21
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Re: UK Taxation on Pension Lump Sum

I only wanted to see if I could avoid the loss of paying UK tax on the 75%, and per that other advice I'd mentioned, were it possible. Wishful thinking maybe.
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Old 16.09.2023, 18:27
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Re: UK Taxation on Pension Lump Sum

I THINK but really find some proper advice, the way to do it is

1) to transfer to a SIPP,
2) then take your 25% tax free,
3) then take drawdown over several years, investing it in the meantime.
4) Drawdown is taxed n the UK (because the Swiss see it as a series of lump sums, which the Double Tax Agreement says are taxed in the UK). I

f you take the whole 75% in one go, you will probably pay higher rate of UK tax on part of it as it would all be taxed as UK income in a single year.

If you take a bit each year, you can pay a lower rate, because you aren't taking enough to get you into the top rate tax band...
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